Octopus VCT 2 PLC Octopus Vct 2 Plc : Half-yearly Report
August 08 2013 - 11:49AM
UK Regulatory
TIDMOVC2
Octopus VCT 2 plc
Half-Yearly Results
8 August 2013
Octopus VCT 2 plc, managed by Octopus Investments Limited, today
announces the Half-Yearly results for the six months ended 30 June 2013.
These results were approved by the Board of Directors on 8 August 2013.
You may shortly view the Half-Yearly Report in full at
www.octopusinvestments.com. All other statutory information will also be
found there.
About Octopus VCT 2 plc
Octopus VCT 2 plc ('OVCT 2' or 'Company') is a venture capital trust
('VCT') which aims to provide shareholders with attractive tax-free
dividends and long-term capital growth by investing in a diverse
portfolio of predominately unquoted companies. The Company is managed by
Octopus Investments Limited ('Octopus' or 'Investment Manager').
The Company was incorporated on 6 January 2011 with the first allotment
of equity taking place on 16 March 2011. The Offer for new subscriptions
for shares was open until 31 December 2011 by which time the Offer had
raised a total amount of GBP19.3 million (GBP18.2 million net of upfront
costs). The Company invests primarily in unquoted UK smaller companies
and aims to deliver a high level of capital security.
Venture Capital Trusts (VCTs)
VCTs were introduced in the Finance Act 1995 to provide a means for
private individuals to invest in unquoted companies in the UK.
Subsequent Finance Acts have introduced changes to VCT legislation. The
tax benefits currently available to eligible new investors in VCTs
include:
-- up to 30% up-front income tax relief;
-- exemption from income tax on dividends paid; and
-- exemption from capital gains tax on disposals of
shares in VCTs.
OVCT 2 has been provisionally approved as a VCT by HM Revenue & Customs
('HMRC'). In order to achieve approval the Company must comply with
certain requirements on a continuing basis.
By the end of the Company's third accounting period, being 31 December
2013:
-- at least 70% of the Company's investments must comprise 'qualifying
holdings'* (as defined in the legislation);
-- for funds raised pre 6 April 2011, at least 30% of the 70% of qualifying
holdings must be invested into Ordinary shares with no preferential
rights;
-- for funds raised post 5 April 2011, at least 70% of the 70% of qualifying
holdings must be invested into Ordinary shares with no preferential
rights;
-- no single investment made can exceed 15% of the total company value; and
-- a minimum of 10% of each Qualifying Investment must be in Ordinary shares
with no preferential rights.
* A "qualifying holding" consists of up to GBP5 million invested in any
one year in new shares or securities in an unquoted UK company (or
companies listed on AIM) which is carrying on a qualifying trade and
whose gross assets do not exceed a prescribed limit at the time of
investment. The definition of a "qualifying trade" excludes certain
activities such as property investment and development, financial
services and asset leasing.
OVCT 2 will continue to ensure its compliance with these qualification
requirements.
Financial Summary
Six months to Six months to Year to
30 June 2013 30 June 2012 31 December 2012
Net assets (GBP'000s) 18,046 18,097 18,180
(Loss)/profit after tax
(GBP'000s) (134) 49 132
Net asset value per share 93.5p 93.8p 94.2p
("NAV")
Chairman's Statement
I am pleased to present the half-yearly report for Octopus VCT 2 plc for
the period ended 30 June 2013.
Performance
The Net Asset Value ('NAV') of the Company has fallen from 94.2p as at
31 December 2012 to 93.5p as at 30 June 2013. This decline in NAV is the
result of a revaluation of Game Development and Management Limited
('Game Development') which was exited on 29 July 2013. Game Development
is a company involved in the production of video games for video game
publishers. The company had struggled to identify and develop suitable
games in the competitive market environment in which it operates. As
there was little indication that this situation would be resolved in the
near future the Managers took the decision to exit the investment. This
decision resulted in the return of GBP832,500 to the Company at the end
of July, against the initial investment of GBP1 million.
Notwithstanding the disappointing performance of Game Development, the
underlying performance of the Company has been consistent, with loan
interest income exceeding the standard running costs of the Company.
Investment Policy and Portfolio
Over 95% of funds raised have now been invested and the emphasis of the
Manager has shifted to managing the investment portfolio. However, the
Company will continue to seek and invest in suitable unquoted companies
in a variety of sectors and technologies if opportunities arise.
Investments will only be made where the Octopus team is confident that
investments can be structured with a higher level of capital security
with the objective of building a portfolio of investments that focus on
capital preservation.
Whilst the Company has the ability to invest in a variety of sectors and
technologies, the focus is to maintain a portfolio of investments in the
renewable energy sector.
Of the existing investment portfolio totalling GBP17.5 million, GBP13.5
million has been invested in the renewable energy sector and comprises
twenty solar power companies and two ground source heat pump companies.
The remaining GBP4.0 million has been invested in media, consumer
finance and business services. With the exception of Game Development,
as detailed above, all investments are currently held at cost.
Cash and Liquid Resources
Univested cash is deposited in carefully selected banks and money market
funds with capital preservation being the main priority.
Principal Risks and Uncertainties
Risks faced by OVCT 2 include economic, investment and strategic,
regulatory, reputational, operational and financial risks. These risks,
and the ways in which they are managed, are described in more detail in
the Company's Annual Report and Accounts for the year ended 31 December
2012.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice concerning ongoing compliance with HMRC rules and
regulations concerning VCTs. The Board has been advised that the
Company is compliant with the conditions laid down by HMRC for achieving
provisional approval as a VCT.
A key requirement is to achieve a 70% qualifying investment level prior
to 31 December 2013. It is pleasing to report that, as at 30 June 2013,
83.4% of the portfolio, as measured by HMRC rules, was invested in VCT
qualifying investments. In view of the current investment activity, the
Board continues to be confident that the 70% target will be maintained
by the required date, that being 31 December 2013.
Outlook
Despite continued economic uncertainty posing many risks to businesses,
the investments made by the Company in the renewable energy sector are
largely sheltered from such risks as costs and returns are largely fixed
and known. It is for these reasons that these investments are suitable
for the mandate pursued by this Company, being a focus on capital
preservation.
The non-renewable energy investments are also deemed to be within the
correct risk profile and, in the case of Borro, are secured against
borrower's assets. These investments provide strong income streams from
which the Company can operate.
Your Board and the Investment Manager continue to believe these factors
provide a good background against which the Company's NAV can progress,
realising a satisfactory return for shareholders.
I shall be writing to you again at the year end to provide a more
detailed review of the portfolio.
Ian Pearson
Chairman
8 August 2013
Investment Portfolio
Responsibility Statement of the Directors in respect of the half-yearly
report
We confirm that to the best of our knowledge:
-- the half-yearly financial statements have been prepared in accordance
with the statement 'Half-Yearly Financial Reports' issued by the UK
Accounting Standards Board;
-- the half-yearly report includes a fair review of the information required
by the Financial Services Authority Disclosure and Transparency Rules,
being:
-- an indication of the important events that have occurred during the first
six months of the financial year and their impact on the condensed set of
financial statements;
-- a description of the principal risks and uncertainties for the remaining
six months of the year; and
-- a description of related party transactions that have taken place in the
first six months of the current financial year, that may have materially
affected the financial position or performance of the Company during that
period and any changes in the related party transactions described in the
last annual report that could do so.
On behalf of the Board
Ian Pearson
Chairman
8 August 2013
Income Statement
Six months to 30 June Six months to 30 June
2013 2012 Year to 31 December 2012
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 173 - 173 163 - 163 365 - 365
Loss on
valuation of
fixed asset
investments - (168) (168) - - - - - -
Investment
management
fees - - - - - - - - -
Other expenses (139) - (139) (114) - (114) (246) - (246)
Profit/(loss)
on ordinary
activities
before tax 34 (168) (134) 49 - 49 119 - 119
Taxation on
profit/(loss)
on ordinary
activities - - - - - - 13 - 13
Profit/(loss)
on ordinary
activities
after tax 34 (168) (134) 49 - 49 132 - 132
Profit/(loss)
per share -
basic and
diluted 0.2p (0.9p) (0.7p) 0.3p - 0.3p 0.7p - 0.7p
-- The 'Total' column of this statement is the profit and loss account of
the Company; the supplementary revenue return and capital return columns
have been prepared under guidance published by the Association of
Investment Companies.
-- All revenue and capital items in the above statement derive from
continuing operations.
-- The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds.
-- The Company has no recognised gains or losses other than the results for
the period as set out above.
-- The accompanying notes are an integral part of the half-yearly report.
Reconciliation of Movements in Shareholders' Funds
Six months ended Six months ended Year to
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
Shareholders' funds at
start of period 18,180 18,048 18,048
(Loss)/profit on
ordinary activities
after tax (134) 49 132
Shareholders' funds at
end of period 18,046 18,097 18,180
Balance Sheet
As at 31 December
As at 30 June 2013 As at 30 June 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed asset
investments* 17,297 17,778 17,465
Current
assets:
Debtors 165 157 95
Cash at bank 621 324 687
786 481 782
Creditors:
amounts
falling due
within one
year (37) (162) (67)
Net current
assets 749 319 715
Net assets 18,046 18,097 18,180
Called up
equity share
capital 193 193 193
Special
distributable
reserve 18,047 18,047 18,047
Capital
reserve
holding
losses (168) - -
Revenue
reserve (26) (143) (60)
Total equity
shareholders'
funds 18,046 18,097 18,180
Net asset 93.5p 93.8p 94.2p
value per
share
*Held at fair value through profit and loss
The statements were approved by the Directors and authorised for issue
on 8 August 2013 and are signed on their behalf by:
Ian Pearson
Chairman
Company Number: 07484406
Cash flow statement
Six months to Six months to Year to
30 June 2013 30 June 2012 31 December 2012
GBP'000 GBP'000 GBP'000
Net cash outflow from
operating activities (66) (244) (194)
Financial investment:
Purchase of fixed asset
investments - (6,400) (6,450)
Sale of fixed asset
investments - 275 638
Decrease in cash resources at
bank (66) (6,369) (6,006)
Reconciliation of return before taxation to cash flow
from operating activities
Six months to Six months to Year to 31
30 June 2013 30 June 2012 December 2012
GBP'000 GBP'000 GBP'000
(Loss)/profit on ordinary
activities before tax (134) 49 132
Increase in debtors (70) (104) (42)
Decrease in creditors (30) (189) (284)
Loss on valuation of fixed asset
investments 168 - -
Outflow from operating
activities (66) (244) (194)
Reconciliation of net cash flow to movement in net
funds
Six months to Six months to Year to 31
30 June 2013 30 June 2012 December 2012
GBP'000 GBP'000 GBP'000
Decrease in cash resources
at bank (66) (6,369) (6,006)
Opening net cash resources 687 6,693 6,693
Net funds at period end 621 324 687
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 30 June
2013 have been prepared in accordance with the Accounting Standards
Board's (ASB) statement on half-yearly financial reports (July 2007).
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 30 June 2013
do not constitute statutory accounts within the meaning of Section 415
of the Companies Act 2006.
3. Earnings per share
The earnings per share is based on 19,300,111 shares, being the weighted
average number of Ordinary shares in issue during the period.
There are no potentially dilutive capital instruments in issue and
therefore no diluted returns per share figures are relevant. The basic
and diluted earnings per share are therefore identical.
4. Net asset value per share
The calculation of NAV per share as at 30 June 2013 is based on
19,300,111 Ordinary shares in issue at that date.
5. Related party transactions
Octopus provides investment management and administration & accounting
services to the Company under a management agreement which runs for a
period of six years with effect from 16 March 2011 and may be terminated
at any time thereafter by not less than twelve months' notice given by
either party.
Octopus is entitled to an annual management fee of 2.0% of net assets.
In order to ensure the alignment of interests between Octopus and
Shareholders, the annual management fee will be rolled up (without
interest) and will only be paid to Octopus once Shareholders have
received dividends during the life of the Company and distributions
totaling or exceeding 105p per share. Octopus will only be entitled to
receive an annual management fee for the period from the date on which
shares are first allotted under the Offer until the date on which the
general meeting is held (expected to be in August 2016) at which
shareholders will be asked to approve a motion regarding the future of
the Company.
The administration and accounting fee is payable quarterly in arrears
for a fee of 0.3% of the NAV calculated at annual intervals as at 31
December. During the period GBP30,956 (31 December 2012: GBP54,000 and
30 June 2012: GBP27,200) was due to Octopus Investments and there was
GBPnil (31 December 2012: GBPnil and 30 June 2012: GBP13,600)
outstanding at the balance sheet date.
In addition, Octopus also provides secretarial services for an
additional fee of GBP15,000 per annum. During the period GBP7,500 (31
December 2012: GBP15,000 and 30 June 2012: GBP7,500) was due to Octopus
Investments Limited and there was GBPnil (31 December 2012: GBPnil and
30 June 2012: GBP3,750) outstanding at the balance sheet date.
6. Post balance sheet events
The following event occurred between the balance sheet date and the
signing of these financial statements:
-- 29July 2013 - the Company disposed of its entire holding in
Game Development and Management Limited, resulting in a cash inflow of
GBP832,500.
7. Copies of this report are available from the registered
office of the Company at 20 Old Bailey, London, EC4M 7AN and online at
www.octopusinvestments.com.
This announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Octopus VCT 2 PLC via Thomson Reuters ONE
HUG#1722100
http://www.octopusinvestments.com/
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